In re Leahy, Bankruptcy No. 06-50466.

• Decision Date: 28 September 2007
• Docket Number: Adversary No. 06-2418.,Bankruptcy No. 06-50466.
• Parties: In re Victoria E. LEAHY, Debtor. William Todd Drown, Chapter 7 Trustee, Plaintiff, v. GreenPoint Mortgage Funding, Inc., et al., Defendants.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

376 B.R. 826

In re Victoria E. LEAHY, Debtor William Todd Drown, Chapter 7 Trustee, Plaintiff, v. GreenPoint Mortgage Funding, Inc., et al., Defendants.

Bankruptcy No. 06-50466.

Adversary No. 06-2418.

United States Bankruptcy Court, S.D. Ohio, Eastern Division at Columbus.

September 28, 2007.

William Todd Drown, Mount Vernon, OH, pro se.

Scott P. Ciupak, Hudson, OH, for Defendants.

Victoria E. Leahy, pro se.

MEMORANDUM OPINION AND ORDER DENYING MOTION TO AMEND JUDGMENT ENTRY AND FOR RECONSIDERATION

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

This matter is before the Court on the Motion to Amend Judgment Entry and for Reconsideration ("Motion to Amend") (Doc. 23) filed by Defendant Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for GreenPoint Mortgage Funding, Inc. ("GreenPoint"). Plaintiff William Todd Drown ("Trustee") filed a memorandum in opposition to the Motion to Amend ("Response") (Doc. 25).

I. Background

Victoria E. Leahy ("Debtor" or "Leahy") is the fee simple owner of real property located at 3021 Seeger Street, Columbus, Ohio. On or about July 8, 2004, Leahy executed a mortgage in favor of GreenPoint ("Mortgage"). The Mortgage was recorded on July 15, 2004 as Instrument Number 200 407 150 164 229 in the Franklin County, Ohio, Recorder's Office. Page 14 of the Mortgage bears the signature of Victoria Leahy. Page 15 contains the following certificate of acknowledgment:

Before me the undersigned authority, on this day personally appeared [blank space] known to me (or proved to me through an identity card or other document) to be the person(s) whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she/ they executed the same for the purposes and consideration therein expressed.

The certificate of acknowledgment bears the notarial seal and signature of notary public for the State of Ohio, Robert W. Banhagel, III, and is dated July 8, 2004. The certificate of acknowledgment omitted Leahy's name as the mortgagor.

On June 28, 2006, the Trustee commenced this adversary proceeding by filing a complaint against GreenPoint seeking to avoid the Mortgage. The Trustee alleged that the acknowledgment clause contained in the Mortgage was defective because Leahy's signature was not properly notarized — the acknowledgment clause omitted her name. According to the Trustee, the Mortgage was incapable of being recorded and thus avoidable pursuant to the strong-arm powers granted to him by 11 U.S.C. § 544.

MERS answered on behalf of GreenPoint and promptly filed a motion for summary judgment ("Summary Judgment Motion") (Doc. 9). The Trustee filed a memorandum in opposition and cross-motion for summary judgment ("Cross-Motion") (Doc. 14), and MERS filed a response ("Summary Judgment Response") (Doc. 15). After reviewing the motions for summary judgment, the Court issued an oral decision ("Decision"). The Court considered the following in rendering the Decision:

There is no dispute here that the debtor executed the Mortgage. There is also no dispute that a notary public subscribed his name to the certificate of acknowledgment contained on page 15 of the Mortgage. Rather, the dispute in this case centers on whether the signing was "acknowledged ... before a ... notary public ... who shall certify the acknowledgment [as required under Ohio Revised Code § 5301.01]...." According to the Trustee, because the certificate of acknowledgment is blank and does not indicate that the debtor appeared before the notary, the Mortgage is defective and subject to avoidance under 11 U.S.C. § 544(a)(3). MERS generally argues that because Ms. Leahy is the only person who signed the Mortgage, she is the only person "whose name is subscribed to the foregoing instrument," within the meaning of the notarial attestation requirement of the statute. According to MERS, the absence of her name in the notarial acknowledgment is therefore inconsequential, and the Mortgage is in compliance with Ohio Revised Code § 5301.01. Whether the acknowledgment clause substantially complies with Ohio Revised Code § 5301.01 is a question of law. As stated above, there are no material is sues of fact in dispute in this adversary proceeding. Thus, this case is ripe for summary judgment.

Tr. of Decision 9:16-10:16 (Doc. 21).,

After reviewing the relevant Ohio case law dealing with defective notarial acknowledgments, the Court concluded that the certificate of acknowledgment in this case did not substantially comply with the requirements of Ohio Revised Code § 5301.01, stating:

[T]he acknowledgment clause at issue is problematic for four reasons. First, the clause leaves blank the name of the person who appeared before the notary. Second, the clause references "the person(s)" with no striking out of the (s) to indicate that the person who signed was a single individual. In other words, the word "person" with the (s) after it can lead to the conclusion that it referred to plural persons, not simply a singular individual. Third, the clause references a name "subscribed to the foregoing instrument" The acknowledgment is on a page completely separate from any other page of the Mortgage. Arguably, the acknowledgment clause could relate to a different instrument and a signature of someone else. And, finally, the clause states that "he/she/they executed" the instrument without circling or otherwise designating the appropriate pronoun.

Thus, in this case it is unclear whether the notary actually acknowledged Ms. Leahy's signature.

Tr. of Decision 22:8-23:3.

Because the acknowledgment clause was deficient, the Court concluded that the Mortgage was not properly executed, and "only properly executed mortgages take priority over a bona fide purchaser...." Tr. of Decision 23:7-23:19 (quoting Kovacs v. First Union Home Equity Bank (In re Huffman), 408 F.3d 290, 293 (6th Cir. 2005)). The Trustee, having the rights and powers of a bona fide purchaser pursuant to § 544(a)(3), was therefore entitled to avoid the Mortgage. The Court denied the Motion for Summary Judgment, granted the Cross-Motion and entered judgment in favor of the Trustee (Doc. 22).

MERS now moves the Court to amend the Decision under Fed.R.Civ.P. 59(e), which is made applicable in adversary proceedings by Fed. R. Bankr.P. 9023. Citing authority for the proposition that a motion to alter or amend a judgment should be granted if there is newly-discovered evidence, to correct a clear error of law, or to prevent manifest injustice, MERS contends that the Court should reconsider the Decision because it "misapprehended a fact which had been stipulated to by the parties, and that misapprehension was a partial basis cited by the Court in its [D]ecision." Motion to Amend at 1-2' (citing Triad Int'l Maint. Corp. v. S. Air Tramp. Inc., 2006 WL 1071879 at *1 (S.D.Ohio Apr.24, 2006)). As explained below, even if the Court accepts MERS's contention that a stipulation between the parties existed — a fact that MERS contends the Court misapprehended — this "newly-discovered evidence" does not alter the Court's conclusion concerning the validity of the Mortgage and whether it was properly recorded. Thus, MERS has failed to demonstrate a clear error of law, or that upholding the Decision would result in manifest injustice. The Motion to Amend must therefore be denied.

II. Legal Analysis

A. Standards for Governing Motions to Amend or Alter Judgments

The Motion to Amend is entrusted to the Court's discretion as "[t]he grant or denial of, a Rule 59(e) motion is within the informed discretion of the [trial] court, reversible only for abuse.'" Scotts Co. v. Cent. Garden & Pet Co., 403 F.3d 781, 788 (6th Cir.2005) (quoting Huff v. Metro. Life Ins. Co., 675 F.2d 119, 122 (6th Cir.1982)). "[T]he bankruptcy court has broad discretion in determining whether to grant a motion to alter or amend judgment .... A motion made pursuant to Rule 59 affords relief only in extraordinary circumstances." Crystalin, L.L.C. v. Selma Props., Inc. (In re Crystalin, L.L.C.), 293 B.R. 455, 465 (8th Cir. BAP 2003) (citation omitted).

The relief available under Rule 59(e) is limited and a motion "may be granted if there is a clear error of law, newly discovered evidence, an intervening change in controlling law, or to prevent manifest injustice." GenCorp, Inc. v. Am. Int'l Underwriters, 178 F.3d 804, 834 (6th Cir.1998) (citations omitted). A motion seeking to alter or amend a judgment "is not intended to provide the parties an opportunity to relitigate previously-decided matters or present the case under new theories. Rather, such motions are intended to allow for the correction of manifest errors of fact or law, or for the presentation of newly-discovered evidence." Ohio Say. Bank v. Larson (In re Larson), 103 B.R. 896, 897 (Bankr.S.D.Ohio 1999). See also General Truck Drivers Local No. 957 v. Dayton Newspapers, Inc., 190 F.3d 434, 445 (6th Cir.1999) (Clay, J., dissenting) ("Rule 59(e) motions serve a limited purpose and should be granted for one of three reasons: (1) because of an intervening change in controlling law; (2) because evidence not previously available has become available; or (3) because it is necessary to correct a clear error of law or prevent manifest injustice."); Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir.1998) ("A motion under Rule 59(e) is not an opportunity to re-argue a case."); Fed. Deposit Ins. Corp. v. Meyer, 781 F.2d 1260, 1268 (7th Cir.1986) ("Motions ... to alter or amend a judgment must clearly establish either a manifest error of law or fact or must present newly discovered evidence. These motions cannot be used to raise arguments which could, and should, have been made before the judgment issued." (citation omitted)). Newly-discovered evidence is any evidence that was "previously unavailable." GenCorp, 178 F.3d at 834. The burden of demonstrating the existence of a manifest error of fact or law, manifest injustice or...